Australia: Cabotage Reform In Australia - The 2012 "Reforms" And The Need For Further Reform

Last Updated: 20 February 2015
Article by Maurice Thompson, Christopher D. Keane and Joel Cockerell

On 1 July 2012 the previous Australian Labour Party (ALP) government of Prime Minister Julia Gillard enacted the Coastal Trading (Revitalising Australian Shipping) Act (CTA) and related legislation - the most comprehensive changes to the regulation of coastal trading since the original Navigation Act was enacted in 1912. The stated objective of the 2012 reforms was to revitalise the Australian shipping industry and enhance efficiency and competition. However, almost 3 years after their enactment, the 2012 reforms have failed to revitalise the Australian shipping industry and have come under strong attack from just about every industry stakeholder for subjecting carriers and shippers to a system that is inefficient, anti-competitive and cumbersome.

Since taking office in September 2013, the Liberal - National Party government of Prime Minister Tony Abbott (Abbott Government) has repeatedly confirmed its pre-election commitment to abolish many of the 2012 reforms and introduce much greater flexibility for the carriage of cargo around the Australian coast.  The Abbott Government is yet to provide details of the precise extent to which it proposes to wind back the 2012 reforms.  Regrettably, it is becoming increasingly apparent that any attempt to reverse the 2012 reforms is likely to be blocked by the opposition parties in the Australian Senate.

Coastal shipping in Australia before the 2012 reforms

To fully appreciate the significance of the 2012 reforms, it is important to consider the cabotage regime in Australia prior to the enactment of the 2012 reforms.

The original Navigation Act governed coastal shipping in Australia for almost a century and created two regulatory categories:

  • Australian-flagged ships operating under licence - a permanent and unrestricted licence to carry cargo and passengers, subject to a range of conditions, including labour law requirements;
  • and foreign ships operating under a single voyage permit (SVP) or a continuing voyage permit (CVP) - a temporary permit to carry nominated cargo, but subject to a lesser range of conditions than ships operating under licence.

The Navigation Act operated in conjunction with labour laws which facilitated a significant role for foreign carriers in Australia's coastal trade.  Foreign seafarers working on board ships operating under permit were generally exempt from Australian industrial relations requirements.

As recently as the 1970s more than 50% of Australia's domestic freight task was being moved by coastal shipping.  In 2009 coastal shipping's share of the domestic freight task was still around 20%, despite extensive development of Australia's road and rail networks in the intervening years.

In Australia the main commodities transported by coastal shipping are:

  • dry bulk freight, such as sugar, cement, fertiliser, alumina, iron ore, bauxite and steel;
  • liquid bulk freight such as refined petroleum;
  • and containerised and other cargo.

Since 2000 approximately 75% of Australia's coastal shipping freight has comprised dry bulk freight.  Liquid bulk freight is the next largest freight, while containers and other cargo make up only a very small share of coastal freight.

Precursor to the 2012 reforms - the Fair Work Act

The distinction between foreign seafarers and Australian seafarers engaged in coastal shipping ended in 2009 when the ALP government of Prime Minister Kevin Rudd enacted the Fair Work Act.  Under this legislation, all carriers operating in the Australian coastal trade were required to pay crew wages at Australian award rates.

The difference between foreign wages and Australian award rates was (and remains) substantial.  By way of example, in 2008 a major shipper in the resources sector estimated that the cost of crewing a dry bulk carrier on the coastal trade with international seafarers was 26% of the cost of crewing it with Australian seafarers.

Within months of its enactment, the Fair Work Act was having a deleterious impact with many of the international carriers either withdrawing from, or dramatically scaling back their role in, Australia's coastal trade.  This in turn increased costs and inflexibility for shippers who had relied upon an affordable and efficient coastal trade.

Introduction of the Coastal Trading Act

The CTA replaced the relatively simple system of licences and permits under the Navigation Act with a three-tier licensing regime comprising general licences, temporary licences and emergency licences.

A general licence (GL) is available to Australian flagged ships registered on the Australian General Shipping Register and foreign registered ships intending to transition to Australian registration within 5 years.  Ships holding this licence are obliged to:

  • employ Australian residents; pay crew wages at Australian award rates;
  • comply with annual mandatory reporting requirements (concerning matters such as the type of cargo carried and the ports at which cargo is loaded and unloaded),
  • but otherwise have unrestricted access to coastal trades for a period of up to 5 years.

A temporary licence (TL) is available to foreign-flagged ships and to ships entered on the Australian International Shipping Register.  Ships holding this licence are:

  • restricted to a nominated coastal trade (passengers or cargo) for a specified number of authorised voyages over a 12 month period;
  • able to hire foreign crew, subject to complying with some Australian employment conditions.

Applicants for a TL can only make one application in any 12-month period and are subject to a number of other very onerous requirements, including:

  • specification of loading dates, cargo types, volumes, and ports of loading and unloading at the time the application is made;
  • mandatory publication of the abovementioned information on the website of the Department of Infrastructure and Transport (DIT) to allow GL holders the opportunity to nominate to carry the cargo instead (in line with the requirements of the shipper);
  • and an obligation to negotiate with any GL holder who might nominate to carry some or all of the cargo identified on the DIT website, to determine who carries what.

In the event that the TL holder and GL holder are unable to reach agreement in their mandatory negotiations, the Minister of Transport will determine whether a TL is to be granted and, if so, the scope of the TL.

An emergency licence permits the licence holder to engage in coastal trading for no more than 30 days and is intended to respond to national emergencies such as cyclones, earthquakes and bushfires.  Ships holding this licence are:

  • able to hire foreign crew, subject to complying with some of Australia's labour laws;
  • subject to mandatory reporting requirements at the end of any voyage undertaken during the period of the licence.

The impact of the 2012 reforms on coastal shipping in Australia

The introduction of TLs and GLs under the 2012 reforms has adversely impacted upon the ability of foreign-flagged ships to participate in the Australian coastal trading sector.  Prior to the 2012 reforms, foreign-flagged ships were able to participate in coastal trading under the relatively straightforward system of SVPs and CVPs.  Under the current regime, however, the operators of foreign-flagged ships must deal with a set of procedures that are cumbersome, bureaucratic, impractical, uncertain and heavily stacked in favour of Australian operators.

It would be wrong to assume that the only interests to have been adversely affected by the 2012 reforms are foreign-flagged ships.  On the contrary, the 2012 reforms presented, and will continue to present, a major problem for anyone seeking to ship cargo on Australia's coastal trade.  In that regard, it is well to note that:

  • the participation of foreign-flagged ships in the coastal trade has decreased dramatically, meaning less competition for Australian operators;
  • the lack of competition has caused a substantial escalation in shipping costs to the point where Australian shippers are paying up to double the freight rates that could be offered by foreign-flagged ships in a deregulated coastal trade;
  • high-volume shippers are being deprived of the flexibility required to meet unplanned or urgent coastal shipping requirements due to unforeseen changes to operations or external factors;
  • a number of foreign-flagged operators engaged in coastal trading provide specialised services that cannot be provided efficiently (or at all) by the Australian operators - this is of particular significance to shippers of heavy and break-bulk cargo.

The negative impact of the 2012 reforms is highlighted by the following examples:

  • it has become cheaper for Australian manufacturers to import commodities such as bauxite, gypsum, cement clinker, fertiliser and soda ash which, until very recently, were almost exclusively purchased from Australian producers and shipped around the continent by coastal trade;
  • Caltex stopped refining in New South Wales and withdrew their tankers from Australia's coastal trade - they now import their product from Asia;
  • sugar is now imported from South East Asia and South Africa while the Australian sugar industry contemplates exporting 100% of its product due to the cost of coastal trading.

Temporary licences considered by the Federal Court of Australia

In CSL Australia Limited -v- Minister for Infrastructure and Transport [2014] FCAFC 10 the Full Court of the Federal Court of Australia clarified the law regarding the matters to be taken into consideration by the Minister in applications for the grant or variation of TLs under the CTA.

The majority expressly rejected the proposition that decisions by the Minister's delegate concerning the granting and variation of TLs should adopt an assumed bias towards the holders of GLs.  However, this decision provides little comfort for foreign-flagged operators and those parts of the Australian economy dependent upon an efficient and reliable coastal trading service, having regard to the following matters noted by the majority of the Court:

  • although it is "impossible" to exclude freight rates and their impact on Australian industry in the decision-making process, the question of how much weight is to be put on freight rates in any particular case will generally be a matter for the decision maker;
  • the CTA was not introduced to ensure that shippers are able to obtain the lowest possible freight rates and, as such, the relevant decision maker will need to weigh up a number of "competing considerations".

The majority decision is arguably most notable for confirming the degree of uncertainty in the decision-making framework associated with the granting and variation of temporary licences and the potential of the CTA to undermine an efficient and reliable coastal trading service.

The High Court recently refused a special leave application in relation to this case.

Reform of the 2012 reforms?

By attempting to simultaneously promote an efficient shipping market and revitalise the Australian shipping industry, the 2012 reforms sought to achieve inconsistent objectives.  As the last 2 years have demonstrated, these objectives clearly come into conflict when a higher-cost Australian ship is given preferential rights over a lower-cost foreign ship.  By raising the costs of coastal shipping, the current regime puts the long-term viability of coastal shipping - and many shippers - at risk.  Higher costs have made coastal shipping less competitive with road and rail, and creates incentives for industry to import product rather than ship materials around the coast for local manufacture.

Since the enactment of the 2012 reforms, Australia has had a change of government.  The Abbott Government, elected to office in September 2013, has repeatedly emphasised its commitment to streamline the cabotage regime in the CTA.

In May 2014 the National Commission of Audit, an independent body established by the Abbott Government, recommended the abolition of cabotage policy in its entirety, removing all regulation of access to coastal trading.  Since its publication, this recommendation has been enthusiastically embraced by almost every key stakeholder, with the notable exception of the powerful Maritime Union of Australia. The Abbott Government is yet to provide details of the precise nature and extent of the proposed rollback.

Recent parliamentary debate suggests that the opposition parties (comprising the ALP and several minor parties who control the balance of power in the Australian Senate) are likely to oppose any rollback of the 2012 reforms.  It follows that there is no guarantee that the reforms foreshadowed by the Abbott Government will become law, despite the utterly unsatisfactory nature of the present cabotage regime.

How Clyde & Co can help

Clyde & Co's Australian maritime practice possesses extensive experience assisting the shipping and offshore sectors with all aspects of Australia's coastal trading regulations, including:

  • the obtaining and renewal of licences to engage in coastal trade;
  • representations to, and negotiations with, the Department of Infrastructure and Transport regarding coastal trade;
  • the application of Australia's labour laws to coastal trade;
  • and the impact of these laws upon charterparties and other contracts of affreightment

We will continue to closely monitor developments regarding possible changes to the regulation of coastal trading in Australia and provide further updates in due course.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Maurice Thompson
Christopher D. Keane
Joel Cockerell
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions